Wikipedia

RJR Nabisco

R. J. Reynolds Nabisco, Inc.,doing business asRJR Nabisco,was an Americanconglomerate,sellingtobaccoandfood products,headquartered in theCalyon BuildinginMidtown Manhattan, New York City.[1]R. J. Reynolds Nabisco stopped operating as a single entity in 1999. Both RJR (asR. J. Reynolds Tobacco Company) andNabisco(now part ofMondelēz International) still exist.

R. J. Reynolds Nabisco, Inc.
RJR Nabisco
Company typeSubsidiary
Industry
Predecessors
FoundedApril 25, 1985;39 years ago(1985-04-25)
Defunct1999;25 years ago(1999)
FateSeparatedR. J. Reynolds Tobacco Companyand renamed toNabisco Group Holdings
SuccessorNabisco(now owned byMondelēz International)
Headquarters
ProductsCookies,crackers,cigarettes
OwnerR.J. Reynolds
Websiterjrnabisco(archived)

History

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Calyon Building,former site of the RJR Nabisco headquarters

RJR Nabisco was formed in 1985 by the merger ofNabisco BrandsandR.J. Reynolds Tobacco Company.[2] In 1988 RJR Nabisco was purchased byKohlberg Kravis Roberts & Co.in what was at the time the largestleveraged buyoutin history. In 1999, due to concerns abouttobacco lawsuitliabilities, the tobacco business was spun off into a separate company and RJR Nabisco was renamedNabisco Holdings Corporation.Nabisco is currently owned byMondelēz International Inc.

RJR Nabisco Holdings Corp. (NYSE: NGH) was the parent company of RJR Nabisco, Inc.[3]After the food and tobacco businesses separated in June 1999, Nabisco Group Holdings Corp. owned 80% of RJR Nabisco Holdings Corp., which was the parent company of Nabisco, Inc.[4]

Formation

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R. J. Reynolds Tobacco Companywas founded inWinston-Salem, North Carolina,in 1875 and changed its name to R. J. Reynolds Industries, Inc. in 1970. It became RJR Nabisco on April 25, 1986, after the company's $4.9 billion purchase, and earlier 1.9 billionstock swap,of Nabisco Brands Inc. in 1985.[5][6]On May 7, 1986, one week after the merger, RJR Nabisco sold Del Monte's frozen foods unit toConAgra Foods,[7]followed by the sales of the soft drink brandsCanada DryandSunkisttoCadbury Schweppeson June 3, 1986,[8][9]theKFCfast-food chain toPepsiCoon July 25, 1986,[10]andHeubleintoGrand Metropolitanon January 17, 1987.[11]

Headquarters move

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In August 1986, the RJR Nabisco board announced thatF. Ross Johnsonwould replace J. Tylee Wilson as head of the company effective January 1, 1987. Soon after, Johnson, believing "bucolic" Winston-Salem did not have the right image for a "world-class company", began seeking other possible headquarters cities. After ruling outNew York CityandDallas,the company decided onAtlantabecause it was "nouveau riche and overbuilt".[12]On January 15, 1987, the RJR Nabisco board approved a headquarters move from Winston-Salem toCobb County, Georgia,north of Atlanta, where the company had rented space. The move would affect 250 to 300 employees, while Winston-Salem would still have 14,000 people working for the company. RJR Nabisco donated the 519,000-square-foot World Headquarters Building toWake Forest Universitybut continued to use it until the September 1987 move.[5]Later, RJR Nabisco'sPlanters-Life SaversDivision moved to the former headquarters building.[12]

The leveraged buyout

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The RJR Nabisco leveraged buyout was, at the time, widely considered to be the preeminent example of corporate and executivegreed.Bryan BurroughandJohn HelyarpublishedBarbarians at the Gate: The Fall of RJR Nabisco,a successful book about the events which later became atelevision movieforHBO.

Ross Johnson was the President andCEOof RJR Nabisco at the time of the leveraged buyout andHenry Kraviswas the managing partner atKohlberg Kravis Roberts & Co.Theleveraged buyoutwas in the amount of $25 billion, and the battle for control took place between October and November 1988.

Although KKR eventually took control of RJR Nabisco, RJR management andShearson Lehman Huttonhad originally announced that they would take RJR Nabisco private at $75 per share. A fierce series of negotiations and proposals ensued which involved nearly all of the major private equity players of the day, includingMorgan Stanley,Goldman Sachs,Salomon Brothers,First Boston,Wasserstein Perella & Co.,Forstmann Little,Shearson Lehman Hutton,andMerrill Lynch.Once put in play byShearson Lehman Huttonand RJR management, almost every major Wall Street firm involved in M&A launched frenzied, literal last-minute bids in a fog of incomplete or misleading information.

KKR quickly introduced a tender offer to obtain RJR Nabisco for $90 per share—a price that enabled it to proceed without the approval of RJR Nabisco's management. RJR's management team, working with Shearson Lehman Hutton and Salomon Brothers, submitted a bid of $112, a figure they felt certain would enable it to outflank any response by Kravis. KKR's final bid of $109, while a lower dollar figure, was ultimately accepted by the board of directors. It was accepted because KKR's offer was guaranteed whereas management's lacked a "reset", meaning that the final share price might have been lower than their professed $112 per share. Additionally, many in RJR's board of directors had grown concerned at recent disclosures of Johnson's unprecedented golden parachute deal.Timemagazine featured Johnson on the cover of its December 1988 issue along with the headline "A Game of Greed: This man could pocket $100 million from the largest corporate takeover in history. Has the buyout craze gone too far?".[13]

KKR's offer was welcomed by the board, and, to some observers, it appeared that their elevation of the reset issue as a deal-breaker in KKR's favor was little more than an excuse to reject Johnson's higher payout of $112 per share.[14]Johnson received compensation worth more than $60 million from the buyout, then left in February 1989. In March 1989,Louis V. GerstnerofAmerican Expressbecame the new head of RJR Nabisco.[12]

After the KKR buyout

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On April 27, 1989, RJR Nabisco announced it would move its headquarters to theNew York Cityarea.[15]

As a result of the acquisition, RJR Nabisco divested the following divisions:

Another major consequence of the buyout was that according toUnited States Department of Labor,in its report "American Workplace", over 2,000 workers subsequently lost their jobs, which 72% eventually replaced, but earning less than half of their previous incomes, suggesting that it took most of those who lost their jobs an average of 5.6 months to find new employment.[24]

On March 21, 1991, RJR Nabisco Holdings Corp. became a publicly traded stock. In March 1999, RJR Nabisco announced the sale of the international division of R. J. Reynolds Tobacco, and in June of that year, the company sold the remainder of R. J. Reynolds Tobacco to stockholders. The parent company became Nabisco Group Holdings and owned 80.5 percent of Nabisco Holdings. In 2000,Philip Morrisbought Nabisco Holdings. Soon after that, R. J. Reynolds Tobacco Holdings, Inc., first traded in June 1999, announced the acquisition of Nabisco Group Holdings. The deal was completed in December 2000.[6][25]

Controversy

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Ads on smoking-free flights

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In April 1988, RJR Nabisco fired theSaatchi & Saatchiadvertising agency after theirNorthwest Airlinesad introducing the airline'sin-flight smoking ban.This was despite the agency only being contracted for Nabisco products, not any tobacco products.[26]

Pandora Papers

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In 2021, RJR Nabisco (before it split up) waslistedin thePandora Papersafter the law firmBaker McKenzieset up shell companies in Cyprus.[27]

References

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  1. ^"Investor Information 1997 Annual Report."R. J. Reynolds Nabisco. February 2, 1999. Retrieved on December 2, 1999." Corporate Offices: R. J. Reynolds Nabisco, Inc. 1301 Avenue of the Americas New York, NY 10019 "
  2. ^Bozman, Jean S. "Nabisco seeking DBMS to enhance connectivity."Computerworld.IDG Enterprise,May 18, 1987. Vol. 21, No. 20.89.Retrieved fromGoogle Bookson September 6, 2011. "ISSN 0010-4841"
  3. ^"Corporate Profile."Nabisco Group Holdings.October 1, 2000. Retrieved on December 2, 1998.
  4. ^"Corporate Profile."Nabisco Group Holdings.October 1, 2000. Retrieved on December 2, 2011.
  5. ^ab"RJR Nabisco Plans to Move".The New York Times.January 16, 1987.RetrievedMarch 20,2012.
  6. ^ab"A Stock History – Sequence of Events"(PDF).RetrievedMarch 23,2012.
  7. ^"Conagra to Buy Del Monte Unit".The New York Times.May 7, 1986.RetrievedAugust 26,2024.
  8. ^Stevenson, Richard W. (June 3, 1986)."Cadbury Will Buy RJR Nabisco Units".The New York Times.RetrievedAugust 26,2024.
  9. ^"Cadbury Purchase".The New York Times.July 8, 1986.RetrievedAugust 26,2024.
  10. ^Stevenson, Richard W. (July 25, 1986)."PEPSICO TO ACQUIRE KENTUCKY FRIED".The New York Times.RetrievedAugust 26,2024.
  11. ^Hicks, Jonathan P. (January 17, 1987)."GRAND MET TO BUY NABISCO'S HEUBLEIN".The New York Times.RetrievedAugust 27,2024.
  12. ^abcTursi, Frank; White, Susan E.; McQuilkin, Steve (1999)."Chapter 27: Honk If You're Bucolic".Winston-Salem Journal.Archived fromthe originalon March 7, 2011.RetrievedMarch 20,2012.
  13. ^"A Game of Greed".Time Magazine.December 5, 1988. Archived fromthe originalon March 13, 2005.
  14. ^Bill Saporito (April 24, 1989)."How Ross Johnson Blew the Buyout".CNN Money.Archived fromthe originalon April 16, 2014.
  15. ^"RJR Nabisco Headquarters to Move to New York Area".Los Angeles Times.April 28, 1989.RetrievedMarch 20,2012.
  16. ^Greenhouse, Steven (June 7, 1989)."5 RJR Units Sold for $2.5 Billion - NYTimes".The New York Times.RetrievedFebruary 9,2015.
  17. ^McGill, Douglas C. (July 4, 1989)."Pepsico, to Aid Europe Sales, Buys 2 British Snack Units - NYTimes".The New York Times.RetrievedFebruary 9,2015.
  18. ^"RJR Sending Chun King To Orient".Chicago Tribune,June 22, 1989.
  19. ^"P.M. BRIEFING: Nabisco Sells India, Pakistan Units".Los Angeles Times.July 7, 1989.ISSN0458-3035.RetrievedSeptember 2,2023.
  20. ^"British Conglomerate to Buy Part of Del Monte From RJR".Los Angeles Times.Associated Press. September 8, 1989.ISSN0458-3035.RetrievedFebruary 9,2015.
  21. ^La Ganga, Maria L. (September 26, 1989)."RJR Sells Del Monte Operations for $1.4 Billion: Deal Puts Company Close to Lenders' February, 1990, Debt-Reduction Goal".Los Angeles Times.ISSN0458-3035.RetrievedFebruary 9,2015.
  22. ^Fabrikant, Geraldine (November 9, 1990)."Hearst to Buy 20% ESPN Stake From RJR".The New York Times.ISSN0362-4331.RetrievedOctober 22,2021.
  23. ^Staff (November 9, 1990)."HEARST BUYS 20% OF ESPN".The Buffalo News.RetrievedOctober 22,2021.
  24. ^U.S. Department of Labor, Office of the American Workplace, Volumes 2-3, Issues 1-5.United States Department of Labor. 1994.
  25. ^Eleni Chamis, "Breakup Dismantles the 1985 Union of Two 100-Year-Old Companies,"Winston-Salem Journal,May 13, 1999.
  26. ^Dougherty, Philip H. (April 6, 1988)."Cigarette Maker Cuts Off Agency That Made Smoking-Ban TV Ads".The New York Times.
  27. ^"How America's biggest law firm drives global wealth into tax havens - ICIJ".October 4, 2021.RetrievedOctober 5,2021.

Further reading

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